LPI - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day ladies and gentlemen, and welcome to First Quarter 2019 Laredo Petroleum Inc., Earnings Conference Call. At this time, all participants are in a listen-only mode, later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As reminder this conference is being recorded. I would like to introduce your host for today's conference. Mr. Investor President Vice Hagood, Relations. Ron ahead. Sir, please go

Ron Hagood

Thank you good morning. and

Beyer, and Randy Officer; and Joining members and of Michael as are team. as Chairman Financial Chief Vice Chief Officer Chief Officer; our President me today additional Vice Foutch, Executive well President Senior Karen Operations management Senior Chandler,

and by be to let our results These the statements. statements covered our Act those describing Before morning, you during forward-looking me beyond we many begin intended the for Private Securities of XXXX. reasons, today’s Harbor provisions making that are Safe of goals, assumptions from expectations, control. statements Litigation forecasts beliefs, The may remind forward-looking of which be this Reform company’s these call, are variety we will actual a of differ including

be news Yesterday will results Reconciliations financial non-GAAP reference presentation non-GAAP financial for included making which release and news net XXXX. measures income these first detailing to company measures. EBITDA, adjusted and its income operating to release. we financial are addition, afternoon, yesterday’s In the and issued are a of quarter net GAAP adjusted in

We refer to today’s by this during will page call. presentation

release not on will do Chief you call now this you or www.laredopetro.com. news a it Officer. copy may the access If Randy the presentation, at Foutch, of to website over company’s have I and Executive turn Chairman

Randy Foutch

thank joining Laredo’s the and for first earnings you everyone, morning, conference XXXX Good call. Ron. Thanks, quarter

for creation wide living inventory. on packages moderate into accretion declines a we've XXXX expectation previously that groundwork on focused XXXX the all growth with plan forth In tight earnings plan by development a that in that [ph] to the quarter an the and moving we oil net strategy from were within away put from returns asset type increasing development. our year will development laid the that transition will spaced improve discussed We focused To early cash that the been and transitional the XXXX flow. fourth we transition facilitated drillings As improved spacing efficiency NAV focused Laredo. wide announcing spacing we we be call, the and middle XXXX for spacing this late value anticipated packages operating scene the capital

Additionally, first our in we for personnel XXXX to pledging to flow operational our operating announced and XXXX within full quarter, mid-February moderating our operate exceeded year expenses cash plans we expectations reduced In plan. with gains the land cadence. the our for our

and completion We last continue wide to schedule facing excel anticipated. our completion to operation operations XX earlier of tightly-spaced on wells based operationally ahead enabling on completing wells packages than begin

capital our we and both oil on in align drive total we surpassed cash or full production Furthering costs expectations. on was we quarter, budgeted our the to to able goal our quarter. expected size the personnel of employee expenditures. to and promise non-cash million. reduce reduce unit clear announced positions a total and further plan than delivering XXXX. guidance reduction and confidence continue all to We above per our is XX%. out difficult production XXXX annualized hard operating year approximately cash headcount at our by and Capital in in were released cut level our Subsequent When by below the end target previously We Additionally, we the basis base well for made line took $XX the look first basis. controllable down on expenditures for were cash end relative cost delivered with to capital to flow force. right capitalized we capital on approximately to and expenditures at the In flows more by to approximately operations a made positions choices. plan in an cash, cost reduced officer to align our action some This XX%, and mid-February, XX% our

factors also We could changes of flow assumptions. note made drive cash that to our

Specifically, cost prices, well productivity. service commodity per

decision quarter that and will made to company. end the tactical of have XXXX for the factors advantage first since take of drive flow cash strategic We the higher

cash oil risk prices per approximately approximately First, on oil $XX $XX should per barrel. of and rising floor $XXX from significant flow. – average approximately original This oil restructured our of weighted by to XXXX. weighted the upside We $XX per increased the reduces you on hedges average from price cash our an contracts the balance entering budget floor we barrel. for secures average put anticipated approximately anticipated retain at but $XX price closing million swap hedged secure our our of approximately production. whole contracts WTI oil above approximately on our of into remain most to XX% XX% to unlimited production and fall per per price flows $XX We dramatically Raising our barrel barrel company's hedges while assumptions, barrel in prices

of we of original Second, to already is calls reductions that for completion by saving were XXXX addition sand. services This in we're to reduce budgeted well secured cost in approximately our savings $XXX,XXX included price XXXX. the expected The to capital able at for plan. are XXXX balance in negotiate from new the start

a lawsuit we previously the substantial Lastly resulting in settled to payment Laredo. cash disclosed a

dramatic while cash to completion XXXX should generate profile significantly a to this measured we the Laredo’s decided and This production XXXX the at additional a have We expected exhilarate activities. secured able cash timing when rate. flow and flow, growing in to have impact free drilling will on of allocate are to

of were balance the XXXX. enabled half in plan the of unchanged operational we of now operate first weighted to crews to the two first XXXX, the activity completion occurs relatively XXXX flow half half improved expect as expenditures and of heavily in and The second is the our year. additional updated rigs cash capital position Our by one to

count expected adding X We the second from half wells XX in second XX of half to the in are wells. increasing completions the year, completion our

than the both has updated completions continuous stopping completion operational globally we operations completion will achieved in we now July, have retain years. XXXX activity we on in dramatically was production the This for With as average to operational operating XXXX barrels help of expectations. the that entire XX% Previous per our oil of a in expect flow. plan, updated completed. at in day us than operational XXXX conducting to that plan. plan, production now updated the the being past the approximate offers within oil we under XXXX I a did beyond staying increase And oil now rather second under through expect original drilling are over and would half average of are to efficiencies oil whales plan approximately guidance and production impact build XX,XXX barrels more documentary improved cash XXXX process production positive The an XX,XXX previous day while while versus per

flow maintain level this believe XXXX at Additionally barrel, we increased future measured to a approximately to generate XX% weighted-average anticipated XXXX, of company, expected production to increases updated addition supports to be within well well and the oil with able cash plan importantly with combined underpin oil ability plan rate beneficial cash to while a XX% oil and improve We XXXX Again, operational production. XXXX our pricing oil anticipated oil the in and further improves almost performance cost XXXX, of the in flow production grow to our our XXXX. the price XXXX locking-in puts free by our XXXX, company financial activity retaining to on floor in position in XX%. return increases oil operating rate approximately $XX our lower in operate approximately per limited Schwab's of hedges to with of the of price upside

member are closely Board our Finally now to transitions welcome be in for operational I XXXX. dated in to working leader as the reins our happier of be Pigott and to I April over CEO with he fourth will update. new turn Jason's to a have May not Karen we of could Jason us to XX, quarter team, I Jason you an the Laredo as the and Both hired will takes during role saw call leadership caliber. President. the the join release in the excited as will late company's new press

Karen Chandler

operations and an of for a by guidance than sales individual anticipated. to well Thank three crews efficiency We drilling result as by and you, and wells optimize than rigs and develop around demonstrate managing of to and production Randy. during completions driven including two these the quarter the base had online production first completed In level one more We five and to XXXX, both The our two our teams better earlier operated better first first existing producing total the fully drilling continue quarter crew. completion quarter outstanding was the operations. XXXX dropped anticipated through completion engineering of oils, our focus XX XXXX [indiscernible] rigs in packages we of and of now quarter forecasted packages oil Laredo's base well to at we and the continue both new well production. production brought previously production continued wells. than earlier

within wells now cash indicated end approximately plan, level to expect at significant in updated of to the updated of we benefits. the we year expect this our With flow. Completing in while complete our wells still throughout As couple is through XXXX a XXXX. drive operating XX expected staying plan, operate operating consistently to

effectively In the schedule drilling July, will ending capital the plan, is expected in what plan than original Under the the which be unproductive. original First, in a the on inventory be used end were completed of we substantial a wells to are planned completion the operations scheduled on eliminating year. capital resulting regular dark budget. time updated by more

over us throughout those continuous achieved operations are past we've definition allow better more than efficiencies several efficient the are starting Continuous the Secondly, stopping by year. and will the operations that that to operational retain years.

We continue to drive below cost down levels. XXXX well

reduced cost Our foot $X.X we at reductions we XX,XXX wells. expected completion substantial expect into from $X.X to cost million. and the continue of of our for pricing anticipated reductions a original in We’ve per throughout expect operating for second horizontal combined for began realize the sand. that quarter additional cost end incorporated fairly first XXXX. approximately lower horizontal XX of as the well approximately XXXX. to well in roughly the these XXXX, million reducing savings further well a plan balance quarter Around completion this well. $X $XXX,XXX service services million updated to least approximately approximately well XX,XXX This horizontal was to reductions to cost we budget totaled included and reduction reductions cost These in-basin foot realize In

planned tight completions our quarter, wells. Importantly, of first quarter well second with be we Meaning the in the the will all spacing developed and prudent completing production finished last wide-spacing. in

package meaning first rose Upper are feet The X,XXX yellow the within formation wide-space being wells are two a in This that formation. the is package. package space the zones the simultaneously in is and apart developed zone eight-well co-development Wolfcamp

second developed being Upper but is four-well in as single also of package zone formation development. package wide-spacing, kosher the a The the Wolfcamp

As financial per a four-wells to per wide-space DSU. we on again performance reminder, the DSU. per another now like discussion. operating And equate call would wide-space updated as co-development for outstanding improvement single equate once look to have conclude and to Michael our eight-wells our expectations consistently performance operations will I additional formation execute delivering hand formation by recognizing teams per packages forward to zone packages quarter. I to plan. we They surpassed

Michael Beyer

good There from benefit we’ll first morning. few quarter are issued earnings in contained clarification. items afternoon our yesterday and a you, some release thank additional that Karen, XXXX

general for in particular. in gas First pricing is and our natural realized

account; for When we market. guidance on not items the formula hedge our is the into the Our three we pricing in the get price product, benchmark issue price, for realized process we for differential realized take any to or basis cost the market to into and product settlements. which our does guidance sell a based include product, and

at of our For our natural example, with, sells gas begin production approximately Laredo the price. pricing. index natural at West XX% realized Texas WAHA let's gas To look

is their [indiscernible] addition at month production As price. daily of gas in first sold gas XX% related typically published our market report, spot inside WAHA the by of our the the remaining FERC of natural

West and and a benchmark January EIA, realized Henry we in quarter the gave as got by price February For month of the of XX.X%. to index XX% we XXXX, WAHA published delivery the Hub mid-February, price guidance When we actually were set. already first Texas for

we guidance At we we be that issued $X.XX, expect Btu the for WAHA and price XXXX WAHA XX%, benchmark March those our to resulting $X.XX index charged incorporated And to prices So use fees a in first for for quarter natural of futures per for realizations, delivery percent processors. adjusting Hub estimated prices be the the Henry the time by month. as was Hub being the our the the benchmark expected quarter. Henry index

is XX% benchmark the We the Henry expected actual Henry for the benchmark and price March XX% quarter realizations quarter guidance wellhead are less of for does the to X% X% our of stress that WAHA WAHA time expectation will set gas. actual of our or in the than daily index quarter at we the net I Henry and being February. for $X.XX average of Hub. accounts being our the be prices This XXXX price guidance. less for the realizations the in Guidance at quarter Hub the Hub. for produced for Hub flaring gas fully our in of first The Henry Hub at for mean $X.XX this This WAHA not index second pre-hedged Henry resulted index. gas spot realizations

being our NGL by actual gas the prices our wet purchasers, gas the of April of gas and Guidance the quarter. prices is for second is is the of May, processed. futures spot Our the residue still being second are for balance components. quarter and WAHA downstream The realizing the into value based and sold pipes for we price, date off Hub Henry to index still

the and Henry on based index of an for MMBtu. and gas is two and relative our price gathering second Traditionally, of we approximately Our Hub WAHA at streams. average of MMBtu current prices, between expectations processing the per per for $X.XX the allocate purchasers revenue $X.XX fees for pricing those charged quarter NGL the realized gas

considered residue to as to almost incurred of the the sales revenue a fees minimize minimal. we WTI the To price our stream will For revenue all gas NGL NGL gathering robust fees in hedging the of stream guidance revenue quarter program and is processing of our our we gathering NGL the price. This allocate full company on second quarter, the second of and XX% in of plan processing to be volatility place. our benchmark from have allocation impact pricing

NGL XX our for discussed current but hedging have hedges majority activity we gas natural We current also gas presentation executed Details pricing. page on current XX% product extensive April, XXXX. to on corporate substantial Natural posted and hedged anticipated the offer protection of in our And of XXXX hedges website. our we and in of basis oil have volumes our approximately of represent our are anticipated relative production.

our expectations hedges per before MMBtu. in Hub yield $X.XX of of clarification as per guidance, are of operational hedge expected cents to a the costs Henry realized $X.XX with $XX before cash align price is expenses in implemented savings for better fees announced capitalized personnel a combined non-cash price and the second our for previously These approximately April This Waha $X.XX we quarter savings. in Second realized MMBtu. item cadence. G&A million annualized G&A and in fees in result A our reduction early to combined with resulting company our a force reductions

new G&A Second hiring associated per our with quarter also partially its guidance of the of BOE reductions, reflects recent cash items one-time president. reflects $X but

to and back our $XXX reserve growth XXXX. significant drawn. value normalizes it provides quarter in group facility. in decline borrowing in liquidity banking This facility XXXX. the company We reserve increasing more BOE with billion in to our $X.X of line April Also we our per base the further $X.XX expect as the expect this of reserves currently to of cash base resume approximate G&A third Further set million with

our finance for XXXX. cash what Operator, open to our for place, generate in able That's within to previously XXXX XXXX combined and flow our to please with by updated As mentioned operating line flow in underpinned commitment Laredo cash hedges oil to production, grow the operate XXXX. be free questions. love and

Operator

you. comes Stifel. Thank from Derrick question Whitfield of the Instructions] with first Our line [Operator

line is go Your Please open. ahead.

Derrick Whitfield

to tactical I your steps strategic free the team all. profile want congratulate cash flow the production company. on taken your morning Good and change Thanks. of first to and

Randy Foutch

Thank you.

Derrick Whitfield

and speak objectives Randy to density a low test the relatively most of or of batch Karen. Could four some whether for years batch? development degree second Or Perhaps is for each it first wells? appropriate. you to or Is your on is geology the eight unique

Randy Foutch

in on lot have some have lot production thinking forward. X do show We data course what ready. one I’ll gets we're our completions is to we've of presentation And off history. let a more detail, pretty which kind of but and we’re going slide terms of in you that now drilled kind we of as to Karen page wells and we let address a know, and got being starting been of significant of

comfortable we're got the wider on [indiscernible] with we’ve spacing the think tighter inventory I spacing. So added inventory, plenty of

So you anything I pretty we're want Randy else? think to comfortable, add

Karen Chandler

the And the the add coming same remaining year two for and same eight on the that rest all what packages a the range packages that particular All wider development we issue in for is area. we of thing packages up the at the we're really year doing spacing. fit the think to to are that based profile best rest that are four the is of mentioned only the of I'll the fit the mix

Randy Foutch

have for been just client said I’ll time economic. productive other that that And zones the in places we've and has we are some point out some pretty

and but wells. some that's good get better know don't it's there we that a when pretty return back our to So of I still actually out

Derrick Whitfield

D&C improvement that is Helpful cost. the market much in $XXX,XXX versus regarding my follow-up improvement well of or self-help and optimization? How as completed

Randy Foutch

better keep and more record. quarter kind a bit learning We more feel about we've I'm how about of just be I – and much that always more continue – hard how keep of gotten we better. saying it's I more getting and broken we've efficient every efficient, talking we like but can't worked a I just getting this As little efficient are we do to to think

for Now cost improvement sand a been big us. is obviously

Derrick Whitfield

Dan. Thanks,

Operator

Thank you. And Sachs. line our of next with from question Singer Goldman comes the Brian

open. go is line ahead. Your Please

Brian Singer

Thank morning. Good you.

Randy Foutch

Brian. Good morning,

Brian Singer

on As the and hedges, both decline well as capital you profile then the from risk the shareholders? return you from better the lower or the such of now to how did proceeds options that in weigh the options as net down as other reinvesting well were use considering direction to you're debt lower debt taking as as, mitigate business the versus or litigation pay

Randy Foutch

Obviously, the all of those considered. table were and on options

You substantively know, cash is neutral. still, position free drilling in going very more we actually flow ore XXXX within flow flow put – a growth. And of we're well cash having in us and this more think cash good forward

Brian Singer

expect And that oil – is is the production mix the you the you've what relative second given that been, oil greater have has go oil any or see of would and to production the up as flat would fall? mix – or total levels, a question to my continue on or there on on impact it where highlighted mix should percent stay activity that side, we

Randy Foutch

Yeah. This quarter first this Michael, is and at right XX%. [ph] Eric is – was

cadence to the would second expect three think we mix stay relatively given just XX thatXX Our about quarter quarter, I was next kind flat X%, during down the XX%. oil to for that or the guidance And year. at for the quarters of per more completions of

Brian Singer

Thank you. Great.

Randy Foutch

you, Brian. Thank

Operator

the comes of next Richard with Capital line question from Tullis our Thank One you. Securities. And

ahead. is line open. Your Please go

Richard Tullis

increased be year. and in? plants regarding first there Hey, the drilling will of Upper the I half guess second the or Randy, retirement. Middle target on mixed Wolfcamp morning the be the Wolfcamp some thanks. main planned question for the Will my is Good congratulations

Randy Foutch

Wolfcamp remaining both both the Middle co-developed. single are the packages, for we Yes, upper year, completing zone and of and

Richard Tullis

forward Okay. plus Tier any at do return And going you or then rate Upper $XX the looking Wolfcamp have XX% inventory say greater at do how locations you just and of Xs oil? inventory, drilling or $XX many say, Middle –

Ron Hagood

cost in Yeah, those we've if is Ron. Middle not the it's in half inventory we – about are it's Upper This got not locations if of wouldn't approximately Richard. Wolfcamp. meeting it's the But X,XXX not our incline, our inventory going of you be economic, capital, Upper, anyway. to Middle if and include in and Hey, Lower

Richard Tullis

on little verify capital meeting flow Okay. Thanks, just it Is lastly, in I the budget? toward Shell the live as being within think included allocated million. the around And to $XX over settlement that just cash Ron. the trading is free increased then XXXX was – a with for

Michael Beyer

is of in is this year. Yeah, included That the in expenditures into that that allocated capital were million number the $XXX Michael.

Richard Tullis

Well me. for Thank that's Okay. all you. All right.

Randy Foutch

Thank you.

Operator

comes Thank question with you. And Pickering. next from the Panjwani our of line Sameer Tudor,

open. Please go is line ahead. Your

Sameer Panjwani

Hey guys, morning. good

Randy Foutch

morning. Good

Sameer Panjwani

for next the highlighted cash XXXX, on the should progression the be also you've through feel like Kind years? of flow production confirm but it capital to flat talk just Since you of free relatively that. few wanted about can expected XXXX, to program

Michael Beyer

is Yeah. Michael. This

for the relatively kind is, flat the XXXX be So of that would way kind today we're to capital is looking again expectation XXXX, about and our compared flat of XXXX. at in

So start set doing we oil up and in with XXXX really XXXX today XXXX. what go and especially to this XXXX for as the we're flat through growing is

Sameer Panjwani

I several thoughts years. out decline makes over PDP next sell the also then that sense. Okay, the wanted rates on how to should get And your oil

XXXX? XX% at how decline look at rate end end of you XXXX So the expect the and that XXXX do of to

Ron Hagood

on We’ll as a Hey, Sameer. that on This lot to a data go as mean, of forward, that's end you basis, the us PDP that yearly of there's expect at so projections of each analysis yearly I update can close basis. the out going is year, going just that. a far reserves we'll to update we as into Ron. but especially the update

Sameer Panjwani

expecting flow if XXXX squeeze free of guys I the guys to cash low of the in you see side. growth about kind one the if more quantify thinking the – you accompany last in. on squeeze to – could can one are production you're Okay. Wanted to And mid-single-digit then level

Ron Hagood

Yeah.

but and going costs early then still still our too commodity probably and prices where that CapEx where commodity the to to it's little based are, bit be costs on in in hit XXXX. number end, a So, it's

we'd we much a a I real for get XXXX, be number to that. think in get once through better position

Sameer Panjwani

Thank Okay. you.

Operator

Thank I'm to over any back Mr. Hagood at Ron further And I to the would showing you. remarks. turn And no time. this questions closing for like conference

Ron Hagood

I We your to Laredo first call. interest appreciate and our quarter for just want in have great joining us say for morning. a thanks

Operator

Ladies the and gentlemen, today's does may disconnect. day. you thank you for Everyone, conference. participating This a conclude and program in have all great

Vital Energy (VTLE) 2 May 192019 Q1 Earnings call transcript